Dreaming Of Early Retirement? A Few Factors To Consider
Many of us fantasize about leaving the stress and aggravation of our 9-to-5 jobs and simply living the lives we want. While winning the lottery or inheriting millions of dollars from a long-lost relative probably aren’t sound financial strategies, it is possible to retire early if you make a series of reasonable, pragmatic decisions.
Downsize your lifestyle significantly.
If you want to live the rest of your days in the lap of luxury, then you might need to win the lottery. However, if a lavish lifestyle isn’t important to you at all (but managing financial pitfalls is), you can take stock of your spending habits and assets and determine what you’ll need for food, shelter, and healthcare, and go from there.
Firstly, calculate your current spending rate, since it will determine how much you’ll need to save. Figure out what you will be able to eliminate simply by no longer working (cost of commuting; professional association fees). Next, determine which expenses you can simply eliminate (cable television; lattes). Finally, investigate where you could be over-spending (cell phone plans; expensive grocery stores; car payments and maintenance).
Work towards paying off your debt.
This is probably the single biggest hurdle to overcome when planning for an early retirement. While it might be wise – in some circumstances – to keep a mortgage if the funds can be used to invest in lucrative financial markets, you should nonetheless do your best to pay off other outstanding debt that can’t be successfully leveraged, like student loans and credit cards.
Plan for medical expenses.
The second biggest hurdle for many Americans is anticipating the cost of healthcare during retirement – and now that the Affordable Care Act is under threat, it’s nearly impossible to know what mandates will be available.
Because the cost of health care has historically risen faster than the inflation rate, it is important to calculate your health-related expenses at an increase of approximately 5 percent per year. Also, investigate different supplemental insurance plans as well as the benefits of a Health Savings Account.